The advantages of clustering: the case of Spanish electronics subcontractors

This research analyses the potential benefits accruing to high-tech subcontractors through spatial clustering. We test our hypotheses with data on Spanish electronics subcontractors. We use a representative sample of 105 companies, with data on 31 different tasks performed to order and 44 electronics products produced for open markets. We perform Pearson χ² tests, exact tests and t-tests. Clustering accrues significant benefits to subcontractors, especially small or regional firms. First, clustering helps small and regional firms to secure outsourcing contracts. In contrast, in peripheral locations, contracts are secured by local affiliates of companies operating at the national level, rather than by regional companies. In such locations, subcontractors are relatively large plants that have diversified into electronics from other industries. Second, clustering enables subcontractors to participate in manufacturing of core products under contract (not only in services or auxiliary-industry subcontracting). Clustering also facilitates specialisation and improves scope economies in such firms. In clusters, product variety arises not only because of great diversification among plants, as usually held, but also due to great within-establishment diversification in lines of customised production. Third, clustering per se does not facilitate subcontractors' participation in open markets, but location in specific regions does.

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